AWMA Module 6 Quiz Executive Benefits Planning for
High Net Worth Clients questions with verified answers
A funded deferred compensation plan
A) will be taxable to an employee if nonforfeitable.
B) does not avoid current income taxation.
C) will provide an immediate deduction to an employer.
D) must be made available to all employees. Ans✓✓✓ A)
If the employee has constructive receipt of plan compensation (funds
are nonforfeitable), such compensation will be taxable to the
employee.
A rabbi trust is
A) a form of irrevocable grantor trust established by an employer.
B) a form of revocable grantor trust established by an employee.
C) a form of irrevocable grantor trust established by an employee.
D) a form of revocable grantor trust established by an employer.
Ans✓✓✓ A
A rabbi trust is a form of irrevocable grantor trust established by an
employer.
A top hat plan
,A)
may be funded or unfunded.
B)
provides current benefits for key employees.
C)
is intended to provide benefits to all employees of a company.
D)
is subject to the reporting and disclosure requirements of ERISA.
Ans✓✓✓ D)
Although not subject to the other provisions of ERISA, a top hat plan
must comply with that law's reporting and disclosure requirements.
All of the following are advantages to implementing a nonqualified
deferred compensation plan, except
A) NQDC plans are always free from ERISA regulations.
B) there are no nondiscrimination rules.
C) It allows employers to attract and retain key employees.
D) the NQDC can be offered to a select group of employees. Ans✓✓✓
A
Depending on the type of NQDC plan, it may be subject to some of
ERISA's regulations.
, All of the following describe contrasting characteristics of qualified and
nonqualified plans except
A) the requirement that the plan must benefit a specific percentage of
nonhighly compensated employees.
B) the timing of the tax deductibility of the employer's contribution to
the plan.
C) the availability of rollover provisions to preserve tax deferral after a
distribution.
D) the ability to defer the employee's tax liability until actual receipt of
the funds at retirement. Ans✓✓✓ D
Both qualified and nonqualified plans enable the employee to defer
taxation on the plan funds until retirement.
Fine Inc. is a small publicly traded corporation. The company wants to
provide an incentive for Ian Good, its vice president of sales, to
continue with the company. However, the company does not want to
deplete its much-needed cash account. Based on the objective of
providing the greatest incentive without depleting cash, Fine Inc.
should establish
A) an executive bonus plan.
B) a restricted stock plan.
C) a quarterly bonus plan.
D) all of these choices would deplete cash. Ans✓✓✓ B
High Net Worth Clients questions with verified answers
A funded deferred compensation plan
A) will be taxable to an employee if nonforfeitable.
B) does not avoid current income taxation.
C) will provide an immediate deduction to an employer.
D) must be made available to all employees. Ans✓✓✓ A)
If the employee has constructive receipt of plan compensation (funds
are nonforfeitable), such compensation will be taxable to the
employee.
A rabbi trust is
A) a form of irrevocable grantor trust established by an employer.
B) a form of revocable grantor trust established by an employee.
C) a form of irrevocable grantor trust established by an employee.
D) a form of revocable grantor trust established by an employer.
Ans✓✓✓ A
A rabbi trust is a form of irrevocable grantor trust established by an
employer.
A top hat plan
,A)
may be funded or unfunded.
B)
provides current benefits for key employees.
C)
is intended to provide benefits to all employees of a company.
D)
is subject to the reporting and disclosure requirements of ERISA.
Ans✓✓✓ D)
Although not subject to the other provisions of ERISA, a top hat plan
must comply with that law's reporting and disclosure requirements.
All of the following are advantages to implementing a nonqualified
deferred compensation plan, except
A) NQDC plans are always free from ERISA regulations.
B) there are no nondiscrimination rules.
C) It allows employers to attract and retain key employees.
D) the NQDC can be offered to a select group of employees. Ans✓✓✓
A
Depending on the type of NQDC plan, it may be subject to some of
ERISA's regulations.
, All of the following describe contrasting characteristics of qualified and
nonqualified plans except
A) the requirement that the plan must benefit a specific percentage of
nonhighly compensated employees.
B) the timing of the tax deductibility of the employer's contribution to
the plan.
C) the availability of rollover provisions to preserve tax deferral after a
distribution.
D) the ability to defer the employee's tax liability until actual receipt of
the funds at retirement. Ans✓✓✓ D
Both qualified and nonqualified plans enable the employee to defer
taxation on the plan funds until retirement.
Fine Inc. is a small publicly traded corporation. The company wants to
provide an incentive for Ian Good, its vice president of sales, to
continue with the company. However, the company does not want to
deplete its much-needed cash account. Based on the objective of
providing the greatest incentive without depleting cash, Fine Inc.
should establish
A) an executive bonus plan.
B) a restricted stock plan.
C) a quarterly bonus plan.
D) all of these choices would deplete cash. Ans✓✓✓ B
